Global Tips

Expense Reporting Changes for U.K. Employers

ByKatie Davies

As of April 6, businesses with U.K. operations no longer have to formally apply for P11D dispensations. Prior to that date, these dispensations gave U.K. employers an exemption from reporting many routine business-related expenses—such as travel, phone calls, and entertainment—that local tax authorities deemed “wholly, necessarily, and exclusively” for business purposes.

Starting April 6, we are officially in the post-P11D-dispensations era. U.K. employers are now permitted to “self-determine” which reimbursed expenses must be disclosed to U.K. authorities (employee benefits are still reported in the usual way). This sounds like unqualified good news for employers, but they must be wary in the face of this recent deregulation. The principles dictating what is reportable (and hence taxable) have not changed. And companies with U.K. operations must maintain the same robust, compliant expense policies and financial controls that they had in place prior to April 6. This includes continuing to collect data on the nature of all reimbursed employee expenses.

It is true that the end of P11D dispensations has resulted in less work for employers in at least one area—they no longer must formally apply for dispensations and keep those dispensations current. However, removing dispensations has also removed guidelines that gave clarity on which expenses were pre-approved as exempt from reporting. Now, employers must decide on their own whether they must report various types of expenses on form P11D.